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Operational Institutions
Independent Task Force Report
Strengthening Palestinian Public Institutions
June 28, 1999
Introduction
This section of the report assesses the capacity and performance of the ministries and agencies (“operational institutions”) of the Palestinian Authority that are directly responsible for delivering services to the Palestinian public and for promoting a legal and regulatory environment that will support a free society and market. The report presents recommendations with the aim of strengthening the institutional framework for more effective and efficient:
These issues gain added importance if the PA is to meet potential challenges such as rapid population growth, compliance with General Agreement on Trade and Tariffs/World Trade Organization (GATT/WTO) criteria to ensure external market entry, and highly competitive market trends related to information and other technologies.
The report envisages five primary targets in the development of PA public institutions:
These targets have been assessed against the present capability of PA operational institutions to fulfill the following specific tasks within their own area of functional specialization:
The emerging institutional culture is reflected in such major factors as mission statements and legal mandates providing clear definition and separation of tasks and responsibilities, rules and regulations governing personnel and financial matters, clear organizational structures and chains of command, and procedures and systems for information exchange.
The rest of this section is divided into two main parts. The first summarizes the contextual and background factors that have affected Palestinian public institution-building since 1994, and identifies its principal patterns. The second addresses in turn the five “clusters” of operational institutions, as defined by their main function. This will situate the establishment and performance of these institutions within their historical and material context; list the principal institutions operating within each cluster; note their achievements to date; identify the main challenges and problems, including those that will arise in future; and conclude with recommendations for specific improvements and reforms.
Contextual and Background Factors
When the PA was established in mid-1994, it lacked top- and mid-level personnel. It also lacked expertise in policy formulation and implementation, planning, and public administration. These obstacles were more severe than for most contemporary post-conflict societies. This background had major implications for PA ability to provide efficient and effective service delivery and to promote a legal and regulatory environment that would support a free society and market. It also had serious implications for the rapid emergence of transparency, accountability, and other elements of good governance. For these reasons the international donor community has devoted a substantial part of its financial and technical assistance since 1994 toward the development of Palestinian public administration, personnel, planning, financial management, social legislation, economic regulation, and law enforcement.
The PA has confronted an unusual combination of obstacles in its effort to develop these fields. Not least is that many of the operational institutions and administrative systems required for modern government were nonexistent and had to be built from scratch. This required development of entirely new skills and job descriptions. In some cases there was uncertainty and confusion about the precise roles of the new structures and their relationship to existing institutions and systems. The priorities and policies of the international donor community and Israel have additionally had a major, at times negative, impact on institutional development and planning.
The PA’s task has been particularly complicated by two contextual factors. First it lacks control over major economic instruments, due both to Israeli physical control of all points of exit and entry and to the terms of the Oslo framework. This has rendered government revenue and national income especially vulnerable to the fluctuation of political and security relations between the PA and Israel, making them difficult for planners to predict.
The second contextual factor is that the PA must operate in two, nonadjacent territories: the West Bank and Gaza Strip. These two areas are additionally separated from East Jerusalem, which is an important center of Palestinian social, commercial, and cultural activities. Israeli measures restricting travel both between and within the West Bank and Gaza Strip have severely impeded the movement of PA personnel. This has greatly compounded the difficulty of integrating and unifying the two different legal and administrative systems in force in the WBGS since 1948. It has also worked against standardizing institutional procedures and practices within the PA. Severe difficulties in movement from one area to the other compelled most ministries and agencies to establish mirror branches in the WBGS. This has increased the amount of paperwork, duplication, and bureaucratic procedure.
Public Sector Management: Public Administration, Personnel, and Planning
Context
The management of public administration involves three main elements: organization, people, and tasks. The first of these corresponds to the structure and functional differentiation of the public administration; the second to recruitment and promotion criteria and to human resource development; and the third to the planning and coordination of the former two elements across the PA as a whole. The third element also encompasses sectoral approaches to providing requisite resources and enabling frameworks for physical infrastructure, the economy and finance, and social services.
The PA inherited a divergent and often contradictory institutional legacy from the Israeli-run Civil Administration and the PLO. On the positive side, the PA assumed control of an existing public administration staffed by a large number of locally based and experienced civil servants, allowing it to ensure a rapid and relatively smooth takeover of service delivery in certain sectors, most notably education and health. Also inherited were operational procedures in various fields and internal rules and regulations of public administration. PLO personnel brought with them the political skills and authority needed to weld public institutions into a single system of government and to deal with sovereign donor states and international institutions. They also brought the requisite experience to build the new police force and fulfill law-and-order functions
On the negative side, inherited organizational structures and institutional practices have tended to impede horizontal communications and information sharing, vertical consultation and feedback, and departmental autonomy, especially in policy formulation and decision-making. Very few former Civil Administration personnel had senior level management skills, because virtually all senior posts had been held by Israeli officers. Local Palestinian personnel had little experience with policy formulation, decision-making, and planning. Indeed, they previously had been excluded entirely from certain areas of public administration. PLO personnel, conversely, had political experience at senior levels but little or no training in public administration. Both tended to operate top-down, authoritarian systems of management, with little scope for public consultation or accountability.
With the institutional legacy, the PA has also absorbed a large number of former Civil Administration and PLO personnel. In the former case this was due to the Israeli demand, incorporated in the Cairo Agreement of 1994, that the PA retain all Civil Administration personnel. In the latter case this was due to the political need to address the expectations of returning PLO personnel, who felt that they were entitled to job security and status after years of hardship and sacrifice. An estimated 85 percent of the 75,000 civil and security personnel on the PA payroll by the end of 1996 were inherited from those two bodies, or roughly 65 percent of more than 100,000 persons in public sector employment two years later. This figure represents 15 percent of the total labor force, or one-quarter of the active labor force, but the addition of local government staff and personnel in donor-funded projects takes the total to 125,000. With the use of public sector hiring as a means of easing unemployment, the overall result is serious job inflation, institutional flabbiness, lower-quality public services, and reduced cost-effectiveness.
Inventory
Management of public administration as defined above involves a large number of operational institutions. Most significant in this context are those with PA-wide functions and impact. These include especially the Ministry of Planning and International Cooperation, the Ministry of Finance, the General Personnel Council, the General Control Institute, the Palestinian Economic Council for Development and Reconstruction, the Palestinian Central Bureau of Statistics, and the Ministry of Local Government. Although not an operational institution, the cabinet office could play a growing and useful role in coordinating public sector reform, as well as in government business generally.
Public Administration
Achievements
Since its inception in 1994 the PA has succeeded in taking over and operating the Israeli-run Civil Administration. In doing so it has conducted major expansion, diversification, and upgrading of the structure, capabilities, and tasks of the various departments. The same is true of the services it provides, considering that the area under PA civilian jurisdiction has grown in the same period to encompass 95 percent of the Palestinian population of WBGS, excluding East Jerusalem. This has also required considerable institutional innovation, as new bodies have been established to address a far wider range of needs and responsibilities than before. The most prominent of these are listed in the preceding inventory, but other examples are the Palestinian Environmental Authority, the Palestinian Industrial Zones Authority, and region-wide utilities such as the Water and Energy authorities.
The PA has at the same time absorbed region-wide NGOs that previously operated outside the Israeli-run Civil Administration, such as the councils of Higher Education, Housing, and Health. Some have been completely absorbed within the structure of the relevant PA ministries, while others have acquired a quasi-NGO status and coordinate closely with their institutional counterparts in the PA and with other NGOs and the international donor community. Moreover, the PA has established an additional number of quasi-NGOs to undertake new tasks in similar collaborative format, such as the Palestine Economic Policy Research Institute, the Higher Academy for Scientific Research, and the Medical Council.
Having started with poor initial definition of organizational structures and tasks, the PA has undertaken certain initiatives to reform and rationalize its public administration. The international donor community has played a major role in this regard, as its Sector Working Group on Institution Building coordinates with the counterpart Core Group for Public Administration within the PA. The CGPA consists of six key PA institutions (MOPIC, MOF, GPC, GCI, cabinet office, and the National Council for Public Administration) and in August 1997 submitted its first sector development strategy to the Palestinian Development Plan (PDP) for 1998–2000.
The momentum has been picked up by the creation of a Public Administration Development Unit attached to the PA cabinet, and by President Arafat’s decision in June 1998 to form a Public Sector Reform Committee at the ministerial level. The PADU is suppose to make its annual submission to the Palestinian Development Plan through the PSRC.
Challenges
The establishment almost overnight of a wide-ranging and diverse public administration from distinctly modest beginnings in 1994 has posed numerous problems, many of which are universal to bureaucracies everywhere. Most obvious is the marked duplication of institutions and tasks and resultant fragmentation of public administration as a whole. This is partly because the immediate need to construct operational institutions that could maintain or commence service delivery upon inauguration of the PA meant that some of them were built around individuals. This led to functional overlap and redundancy.
Many ministries and agencies have progressed considerably since the PA assumed leadership, but the combination of personal and bureaucratic rivalries has encouraged the creation of work and tasks to justify the continued existence of certain institutions or departments and to attract resources. The establishment of each new institution inevitably generates additional requirements for offices, cars, computers, communications systems, and other equipment, increasing the overall cost at the expense of operating budgets that are often small to begin with.
The PA executive authority in general is unused to management of a public administration. It tends therefore not to recognize the importance of clarity and differentiation, and accordingly of coordination between public institutions. Placing laws on paper does not ensure that government officials and civil servants know them or know how to apply them.
As a result, task definition and division of responsibilities remain unclear in some cases. The relationship between the Ministry of Interior, Ministry of Local Government, and the municipalities offers an instance of continuing overlap and confusion. The Palestinian Economic Council for Development and Reconstruction and the municipalities are responsible for most public infrastructure projects, but a virtually nonfunctioning Ministry of Public Works continues to exist. In addition, the PLO’s Department for Refugee Affairs oversees project implementation in the refugee camps on behalf of PECDAR, yet is not formally answerable to the PA cabinet.
Some international donor countries have inadvertently compounded the problem by bypassing sector development plans and dealing with individual PA institutions bilaterally. This partly reflects the developmental or domestic political agenda of donors, and partly results from competition between them, leading in turn to rival coalitions with counterpart PA institutions. It also reflects donor desire to get the job done, which means favoring PA institutions with proven track records.
However, preferential access to donor support has occasionally distorted institutional development by favoring institutions headed by politically strong individuals or that are more effective at lobbying. In certain cases it has skewed priorities by drawing resources away from poorly performing institutions that may actually need greater investment. A further unintended consequence has at times been to distort sectoral development, as favored sectors receive a disproportionate share of donor funds and technical assistance while others remain underfunded and undersupported.
In general, the proliferation of institutions indicates the vagueness of Palestinian policy objectives, absence or conflict of development policies, conflict of interpretative judgment, dispute of powers, and lack of planning. This has led to rampant redundancy, reflected in performance of identical tasks by different institutions and in intermingled specialization within single institutions. It has also led to distortion of organizational structure, reflected in imbalance in size and resources between various ministries and agencies and between different administrative levels within them. Some are too large and some too small in relation to their tasks and target beneficiaries.
The highly politicized nature of the social and economic challenges that the PA faces, as well as the teething problems of a nascent public administration, have resulted in a marked concentration of decision-making in the hands of ministers or heads of agencies, not to mention a strong tendency to hierarchical relations. The PA cannot be held strictly to standards of participatory management that many sovereign governments are unable to meet, or that clash directly with local patterns of authority. However, excessively hierarchical relations have weakened internal consultation over priorities and policies.
Hierarchical relations have also underlined inside-outside divisions between “returnee” and local civil servants who have divergent institutional approaches to consultation and access. The general result has been to impede the definition of objectives and targets, reduce information flows within and between operational institutions, and discourage assessment of performance and feedback for review of policy and procedures.
A parallel problem is the tendency of ministers or heads of agencies to circumvent deputies, departmental heads, and other intermediate line managers. Selective intervention may be necessary and even effective where existing organizational charts are inappropriate or under development, or where staff with relevant expertise are in short supply. However, this has disempowered and underutilized mid-level managers, while leaving junior civil servants confused as to their duties.
Additional consequences are an emphasis on personal loyalty, double reporting and circumvention of proper channels, and petty bureaucratic rivalry, leading to distrust and poor morale in some instances. Blurred lines of responsibility and poor delegation of authority have reduced autonomy, while at the same time leading to a negative compartmentalization that exacerbates the duplication of tasks.
A related problem is poor information flows and sharing due to the weakness of horizontal links within and between operational institutions. The inherited management structure impedes horizontal communication and sharing of information, while the difficulty of physical communication between the West Bank and Gaza Strip compounds divergent institutional development and inefficiency.
However, this does not excuse the ignorance of most PA institutions of sector development plans, and in particular of the purpose and activities of the Core Group for Public Administration. Nor does it explain the low level of circulation within the PA of previous studies and reports, including those prepared by the international donor community, most of which are accessible. This is partly due to the tendency to view communications systems in terms of equipment rather than organization and human factors. It is also due at times to the use of information, such as statistical data, as a power resource to be granted or withheld depending on the state of personal or bureaucratic relations between the heads of the institutions concerned.
The premium on competitive institution-building and resource acquisition indicates an undue focus on input and insufficient attention to output. The general result is low productivity and thus low efficiency and high cost of services. The complexity and ambiguity of government procedures contributes to this situation, as does the lack of performance indicators. This is further connected to the perception, common to civil servants in many countries, that adoption of performance and productivity indicators will necessarily lead to negative assessment.
In conclusion, the principal challenge facing the PA in this context is to transform its public administration from a collection of separate and at times rival component parts into a single, integrated whole. There appears to be growing recognition within the PA of this need, but in practice many cabinet ministers and senior civil servants accord engagement in the immediate political context a higher priority than long-term institutional development. The knowledge that the international donor community will pay for the development of public administration is a further disincentive for the PA to make a serious political commitment.
Progress is consequently slow, as the public administration plan continues to lack an unambiguous mandate. The creation of the PSRC has gone some way to address this problem, but deals with it only at the macro level, leaving a continuing gap in operational responsibility at the micro level. Furthermore, the Public Administration Development Unit (PADU) that was supposed to be attached to the PA cabinet appears not to be a functioning body, despite statements that it contributes to the Palestinian Development Plan.
Recommendations
Personnel
Achievements
The PA has successfully brought all personnel records and related matters under two bodies: the General Personnel Council for civil servants, and the Administration and Organization Directorate of the Public Security and Police Force for police personnel. It has also drafted a new Civil Service Law that has made considerable progress in setting clear and sensible guidelines governing recruitment, promotion, pay, and other terms of service. If properly applied, it should greatly enhance the use of meritocratic criteria and measures of efficiency in hiring practices and in determining the number and occupational distribution of staff within any given PA institution.
The PA has additionally taken steps to improve human resource development within the public administration. The cabinet, Ministry of Planning and International Cooperation, and Ministry of Finance are all working on PA-wide training and institution-building programs. Most recently the National Center for Public Administration, which was originally formed with international donor support within MOPIC, has been turned into the new Directorate for Human Resource Development and attached to the General Personnel Council. Previous donor-supported efforts have led to the establishment of approaches to human resource development such as the Training Development Units and Focal Points in ministries. These provide an embryonic network for human re-sources development across the PA.
Challenges
The PA suffers several serious shortcomings related to personnel. These have a demonstrable adverse impact on present institutional capacity and performance and equally significant implications for the future quality and efficiency of outcomes and service delivery.
A foremost problem is the sheer number of public sector employees, which is believed to have exceeded 100,000 in 1998, or 125,000 counting local government staff and donor-funded project personnel. The latter do not appear on the records of the PA’s General Personnel Council. Expansion has continued, despite commitments to the contrary from the PA to the international donor community. This is partly due to the obligation to inherit Civil Administration and PLO personnel. However, the PA could have adopted some of the alternative policies mooted by various parties to encourage personnel to take early retirement or accept credit to start self-employment and income-generating projects. High levels of unemployment, greatly exacerbated by Israeli border closures and other measures affecting the Palestinian labor market, are another cause for public sector expansion.
Internal political considerations and bureaucratic inertia are equally responsible for the unchecked and often haphazard increase of PA personnel. The proliferation of ministries and duplication of tasks exert continuous pressure to expand the payroll. Formal guidelines for recruitment and promotion exist but are often not observed, which means practice varies from one ministry or agency to another.
Also worrisome is that in violation of the Civil Service Law, recruitment and promotion patterns are often distorted by personal and political considerations and by the privileged connections of certain senior officials. This occurs at the expense of meritocratic criteria or any definition of institutional tasks and needs and budgetary ceilings. The power to hire or appoint has become a widespread political resource and a form of mass patronage. Certain institutions have been used in such cases to “hold” inflated numbers of personnel who are nominally placed on their tables of establishment. Occasionally this is driven by the discrepancy in pay scales between the civil service and police force. Predictably, these practices go hand in hand with weak follow-up and monitoring and absence of accountability.
The absence or nonapplication of clear recruitment criteria and guidelines defining the actual personnel needs of specific operational institutions has left certain ministries and agencies overstaffed and others understaffed in certain areas of skills and at certain levels. Much depends on the political connections and force of character of the individuals heading them, and on the degree of international donor interest in promoting good practice in particular institutions. Potentially more serious is the inflation of senior levels and corresponding shrinkage of middle and junior staff levels, creating a top-heavy public administration. This is partly because the PA has met the expectation among returning PLO personnel for rank and status commensurate with previous position and hardship by granting a disproportionate number of senior appointments. This has occurred regardless of the occupa-tional suitability of the individuals concerned or the actual need and absorptive capacity of the institutions to which they are appointed.
The above-mentioned patterns in recruitment have led to rivalries between functioning civil servants and political appointees at senior levels. This is particularly so between deputy ministers and the large number of directors-general and directors. The common perception that personal and political factors play a significant role in appointments has also fueled resentment over the distribution of posts, resources, and associated privileges among civil servants originating from the WBGS, and also between “insiders” and “returnees” or “outsiders.” This points to flaws in the Palestinian system of administration and negative trends in the emerging institutional culture.
Distortion is also due to marked discrepancies in pay. Basic salaries are standardized, but occupational allowances add 10 to 235 percent of basic salary, making up to 75 percent of total salary. Award of allowances is often discretionary and does not follow a fixed practice linked to job performance, leading to preferential treatment and bias among personnel. Indeed, many on the PA payroll are engaged in political activity and do not have clear tasks or formal job descriptions.
At the same time, PA pay levels are generally lower than in the private sector, and so even senior posts are not attractive to high-caliber staff of any grade. Civil service pay averages $500 a month, within a range of $250 to $1,500, in an economy where the cost of living requires $700 a month. Qualified staff therefore tend to be on donor-funded project payrolls and do not commit themselves to public sector careers, depriving the PA of their cumulative skills.
There is growing recognition within the PA of the need for human resource development in order to ensure efficiency and effectiveness of service delivery. Similarly there is increasing attention to the value and impact of training for the role and needs of the civil service. However, the internal capacity to convert such recognition into actual changes in institutional practice and culture is largely missing. Training programs do not appear to be well-targeted, nor do suitable candidates seem to be selected in accordance with clear and appropriate criteria.
For its part the international donor community has made a consistent effort to assist human resource development, but the related Technical Assistance Program has not had a sufficiently strong effect. This is partly because it has been too donor-driven and its means and ends have not been defined in ways that allowed it to be used for a sustainable period. Conversely, there is a distinct need for the PA to plan its own needs more extensively and effectively, as well as to limit and prioritize training within certain sectors.
Finally, the unchecked expansion of public employment renders the PA more heavily dependent on international donor assistance, and more vulnerable to the vagaries of relations with Israel, which controls the revenue transfers that account for 40 percent of PA salary costs. The implications are especially serious with respect to the future pensions bill, anticipated at $2 billion for the current civil service. The eventual incorporation of the U.N. Relief and Works Agency for Palestine Refugees in the Near East will add a large number of staff and a major new financial responsibility. The principal problem remains one of political will on the part of the executive branch and other stakeholders to take early and decisive action.
Recommendations
Planning
Achievements
Planning has represented both one of the biggest challenges facing the nascent PA and one of its biggest achievements to date. The Israeli-run Civil Administration effectively bequeathed no planning capability, but in September 1993 the PLO Economic Department published the PDP for 1994–2000, the result of a four-year effort. The PDP was subsequently overtaken, but it enabled the PLO to coordinate its assessment of social and economic needs in the interim phase with the World Bank and to secure an increase in pledged assistance from the first international donors conference in 1993 to $2.4 billion over the following five years.
The assistance program imposed its own needs. The PLO initially set up PECDAR to receive and coordinate international assistance. Since then, the Ministry of Planning and International Cooperation has come to assume overall responsibility for aid coordination and planning in the West Bank and Gaza Strip. It holds either the secretariat or the gavel in all the sectoral working groups formed with the international donor community coordinating mechanisms. PECDAR is the principal PA agency monitoring donor-funded project implementation and has established a good track record for transparency and accountability in this role.
MOPIC and the PA in general have demonstrated an increasing ability to plan and to prioritize needs. The PDP for 1998–2000 was a marked improvement on its predecessors’ attempt to identify needs and to plan across the PA. MOPIC asserted Palestinian ownership of the planning process by preparing the PDP for 2000–2004 without external assistance. It has also formulated a Palestinian Public Investment Plan (PPIP) to coordinate and direct international assistance and to stimulate local input. This remains primarily donor funded, but the PA budget envisages a modest domestic input to the plan for the first time in 1999.
MOPIC has written a sectoral approach into its own task description, and formed sector units to coordinate needs analysis, planning, and prioritization with relevant ministries and agencies in each case. It has also formed an in-house macro-planning unit. Finally, MOPIC has started to pay greater attention to the structure and needs of public administration.
Furthermore, with the acquisition of greater civilian jurisdiction and territorial control, region-wide PA agencies such as the Water and Energy Authorities have also started to plan for the needs of the WBGS as a whole. All these efforts benefit from the contribution of other PA ministries and agencies, the most significant of which are the Ministry of Finance and the Palestinian Central Bureau of Statistics. The latter has earned a deserved reputation for the quality of the information it compiles, and has filled a significant gap left by the Israeli-run Civil Administration for comprehensive and accessible demographic, social, and economic data.
Challenges
There has been steady progress in Palestinian planning since 1994, but certain key improvements are still necessary. First and foremost is the need for overall vision, whether of national economic and social objectives or of the desired shape and size of public administration. Broad declarations of commitment to free market principles, democracy, and good governance contained in official PA statements or the preamble to the PDP are commendable, but are insufficient in themselves to define intermediate targets or appropriate strategies and mechanisms. However, definition of an overall vision requires political endorsement and leadership, and so the PA cabinet and the PLC must engage in continuous debate with MOPIC and provide oversight and review functions.
Overall vision, moreover, requires development of greater macroeconomic analysis capability, despite some progress at MOPIC in this regard. Sharper focus and greater discipline may therefore increase as the domestic Palestinian input to the PPIP grows, and this should therefore remain a clear aim. The PDP should also be linked to an annually updated, rolling expenditure plan. Indeed the emphasis should be on planning as a capability and process, rather than on the plan itself as a fixed result. This in turn requires development of greater planning capabilities within the individual ministries and agencies.
Prioritization requires a more systematic emphasis on sectoral planning. MOPIC’s in-house approach to this concern has progressed considerably. However, working groups must be formed for every sector, comprising the relevant sector units of MOPIC, the Ministry of Finance, and the ministries and agencies directly affected. Roles and responsibilities in the provision of public infrastructure must be defined more clearly, to ensure more effective division of labor between the main ministries and agencies, region-wide authorities, and municipalities.
The PA has formed core groups comprising relevant PA ministries and agencies in some sectors, but these lack mandates so far and do not substitute for multiagency planning and coordination units in every sector. Furthermore, weak coordination between the two separate wings of MOPIC in the West Bank and Gaza Strip may reflect negatively on the integrity of sectoral working groups if not addressed.
An improved sectoral approach in turn requires improvements in the ability to analyze statistical data, a more effective system for the organization of information flows between ministries and agencies, and more effective vertical and horizontal integration of needs and tasks within each sector. As an example, at present MOPIC, the PCBS, the Palestinian Geographic Center, certain regional authorities and public utilities, and some municipalities are developing their own geographic information systems.
International assistance so far remains the principal source of funding for Palestinian infrastructure projects in various sectors. International donors should also apply greater discipline in channeling their project approval and funding procedures through the central coordination mechanisms with MOPIC. The coordination structure continues to play a vital role, but is too complex for present need and should be simplified. For its part, MOPIC’s duties spill over into international relations, and it should be prepared eventually to hand off certain functions to a Ministry of Foreign Affairs.
Prioritization by MOPIC is equally important because a growing portion of international assistance is now in the form of loans and guarantees rather than grants, and so the PA must take the implications of debt and future servicing requirements into account. This only underlines the importance of ensuring tighter integration and synchronicity between the planning and budgeting processes by MOPIC and the Ministry of Finance. In addition, the PA should set up a unified system for tracking external capital flows and obligations, which would involve both ministries.
In conclusion, the fact that the PA lacks control over economic instruments and borders is also true for many sovereign states, and does not obviate the need to plan, define institutional roles, and improve efficiency and effectiveness in using available resources. This gains special urgency in light of huge anticipated increases in need by the transport, water, and social sectors (health and education) over the coming ten to fifteen years, and of the eventuality that the PA or its successor will assume responsibilities that are at present borne by UNRWA.
Recommendations
Public Finance
Context
The PA assumed responsibility for public finance upon its establishment in 1994. Its main sources of revenue are the taxes and other fees it levies in the WBGS, and the clearance revenues transferred by Israel in accordance with the Protocol of Economic Relations (Paris Protocol) of 1994. The international community additionally disbursed $2.5 billion of assistance in 1994–98, mostly for public investment and institution-building. The PA did not receive or handle this aid, with the exception of $212 million for recurrent budget support and $35 million for employment generation projects channeled through the Holst Fund.
The latter were emergency measures made necessary by border closures. Even so the PA does not deliver all basic social services, a major part of which is provided by UNRWA and various NGOs, which are largely funded from abroad.
The main structural problems of PA public finance are its heavy reliance on Israeli transfer of clearance revenues and its vulnerability to unfavorable “exogenous” factors. These are principally Israeli border closures, a small domestic market, and a high net population growth rate of 3.5 percent to 4 percent annually. For example, comprehensive and strictly enforced Israeli blockades on the movement of goods and labor slowed 1997 real GNP growth to 2 percent. Leakage of goods imported by Israel into Palestinian markets further reduces the PA’s income from customs duties.
Faced with these challenges the PA has had to undertake a major effort to develop its institutional capacity in public finance. This applies to tax collection, budget preparation, auditing, and drafting regulatory and legal frameworks. The International Monetary Fund (IMF) has been the principal external counterpart, monitoring agency, and source of training and technical assistance in this sphere.
The PA had to build its new Ministry of Finance almost from scratch. In doing so, it inherited a mixed legacy. On the one hand it incorporated the personnel and operating procedures and financial regulations of the Israeli-run Civil Administration, while on the other hand it drew its senior officials and much of its institutional culture from the PLO’s Palestine National Fund and Fateh’s Financial Department. Neither body had real experience preparing a public budget, nor subjecting it to debate and review by public bodies. The Military Government and Civil Administration oversaw a recurrent budget that had not increased between 1967 and 1994, with virtually no capital investment component. Finally, the PA inherited a Palestinian public that was deeply distrustful of the tax system applied under Israeli occupation, and viewed under-reporting of income and tax evasion as a national duty.
Financial practice has evolved in light of the many political pressures, both domestic and external, to which the PA cabinet has been subjected. The process is affected by the fact that the PLC is still learning to debate budgetary and financial matters. The multiplicity of legal sources is an additional complicating factor, although there is sufficient convergence for there to be a properly prepared and approved public budget and for administrative and regulatory procedures to be put into effect throughout the PA.
Inventory
The PA institutions dealing with public finance are the Ministry of Finance, the Palestinian Monetary Authority, and the General Control Institute, which provides external audit. The General Personnel Council is also partly involved, in that it pays the salaries of PA employees in the Gaza Strip and manages the hiring of PA employees generally. Two additional institutions have a de facto effect on public revenue and expenditure. One is the public import monopolies and quasi-monopolies, which generate revenues that do not enter Ministry of Finance accounts and are instead effectively controlled by the president’s office. Second, the president’s office itself has expended 6 to 12 percent of the general budget in successive years, without audit, in addition to the unseen revenues of which it also disposes.
Achievements
The MOF’s greatest achievement since 1994 has been to increase revenue collection. This multiplied threefold, reaching some 25 percent of GDP in 1998, and allowed necessary and predicted expansion in the public payroll as the PA assumed more responsibility for social services in the WBGS. The PA was able to keep recurrent expenditure within the ceiling set by the budget and to contain the recurrent deficit up to 1998, when both registered unexpected increases. Indeed, there was a slight rise in revenue despite the depressed economy in 1997, leading to a surplus in 1998 that allowed the PA to commit itself to making a modest contribution to the public investment plan in 1999.
Improvement of tax administration has played a substantial role in this success. This derived from early implementation of a tax arrears settlement program, improved enforcement provisions, hiring of qualified personnel, computerization of processing systems, and more effective taxpayer registration. Through training and a deliberately friendly approach to taxpayers, the MOF has increased compliance to 70 percent. Moreover, the PA has jointly operated a unified invoice system and an effective revenue clearance system with Israel from the outset. More recently the shift from indirect to direct imports via Israel has increased PA revenue from customs and duties on goods destined for Palestinian markets.
At the same time, the MOF has drafted or revised a number of regulatory and legal mechanisms. These include improvement of budget preparation, development of a government financial management and information system that sets out a standardized chart of accounts for agency transactions, introduction of an integrated revenue processing system, and internal audit functions. MOF budgeting and auditing functions have become fully operational, providing a procedural and regulatory framework that is ready for application within all PA operational institutions.
The Organic Budget Law was approved in mid-1998, and in November a new Procurement Law took effect, which formalized provisions and set new standards. The Civil Service Law passed earlier in the year should ensure transfer of control over the payroll to the MOF and introduce greater fiscal responsibility to public hiring. The MOF is also revising the Investment Law, Income Tax Law, Company Law, and other laws necessary for a free market. The Palestinian Monetary Authority Law, passed in 1997, and the new Banking Law are expected to strengthen banking regulation and supervision.
Challenges
Whereas the relevant PA institutions have made remarkable progress in revenue collection, their performance in expenditure management reveals considerable room for improvement. All bodies continue to need equipment, training, and automation, which enables environments of formal regulations that define their mandates and empower them. This extends to budgeting, accounting and auditing, and has implications for the ability to anticipate and meet future financial burdens.
A foremost need is for comprehensive and integrated budgeting in the medium-term macroeconomic and public expenditure frameworks. The MOF has progressed in developing methodologies for articulated budget allocations and accounting procedures, but they are not yet applied by all ministries and agencies.
In April 1999, the Minister of Finance for the first time presented a general statement to the PLC purportedly containing all revenues, in particular international assistance and income from public monopolies, and all expenditures, including all capital investment. Nonetheless, this remained an annual financial statement rather than a plan, and continued to lack detail and a breakdown of objectives and categories of expenditure. Since then the executive authority has failed to submit a formal budget, originally due in November 1998, to the PLC.
There is an urgent need to consolidate all accounts under the MOF, and for all public revenues to accrue to it. This applies especially to the import monopolies and quasi-monopolies and other ventures run by or on behalf of the PA. The IMF estimated that diverted income in 1997 represented 25 percent of total public revenue. The diversion of such revenue to accounts outside MOF control has put pressure on the ministry’s liquidity, compelling it to borrow domestically and to accumulate arrears. In late 1998 domestic debt stood at $93 million, and arrears at $79 million.
The situation regarding monopolies highlights the need for transparency, accountability, and legislation to ensure competition. The PA is understandably concerned about the need to secure its revenue base, following past delays and suspension of the transfer of clearance revenues from Israel. It also sees a need to provide venture capital and pave the way for private investment in a market fraught with political uncertainty and low economy of scale. However this should not prevent the PA from implementing its formal commitment in 1996 to form boards of directors for the monopolies and to bring their revenue under MOF control, even if it is reluctant to privatize them.
There is an equally pressing need to implement PA-wide systems and regulations to promote sound financial management. The government financial management and information system has not yet been implemented, and progress has been slow in applying the Organic Budget Law. Similarly, the unification of customs and disbursement policies between the West Bank and Gaza Strip has been approved, but not implemented. Practice regarding competitive tender and procurement varies widely from one ministry or agency to another. The same applies to budgeting and auditing, as practice within the PA is erratic and fragmented.
On a related point, mechanisms to encourage civil servants to disclose abuse of financial privilege do not exist, nor are there mechanisms to protect them in the case of disclosure or of resistance to improper instructions. Pension funds have been redirected for other purposes without proper accounting for their use, and there has been no alternative provision for future need. Additionally, the ministry must set up a formalized system of sanctions and penalties for infractions, rather than the present ad hoc approach of responding after the fact.
Indeed, the need to improve accountability is pervasive. The MOF has no control over the implementation of central regulations and systems by ministries and agencies, and its internal auditing department covers the civil service in the West Bank only. Ministries and agencies generally have some internal auditing capability, but there is no systematic flow of information to the PA’s external auditing body, the GCI.
The GCI has too wide a mandate at present, yet at the same time it is not empowered to conduct its audit on a regular basis or to publish its findings. It answers directly to the president, who determines whether and when to conduct an audit. The GCI is not responsible for the audit of the police force, which is inspected only by the internal auditing department of the MOF. The president’s office is not audited at all. The GCI should acquire autonomous status and report instead to the PLC.
To further improve financial management, control over the public sector payroll should be transferred completely to the MOF. It should also exercise effective recruitment controls. This would help curb the haphazard expansion of public hiring, which poses major problems for future financial stability, especially the provision of adequate pension funds. Excessive staffing depresses average civil service pay packages and thus compounds the shortage of qualified personnel in front-line functions. It also reduces the quality of services and undermines the public perception of the relationship between taxes paid and benefits received.
These problems require urgent attention also because of the anticipated future burdens on PA finances. Growth in the public payroll has so far been offset by the absence of a general increase in wage rates, but this may be untenable. Population growth generates constant pressure on the provision of education and health. The PA may reduce costs by devolving services increasingly to the private sector, but it may have to take over some services funded at present by international donors or delivered by NGOs. It also faces the eventuality of assuming UNRWA’s current responsibilities and financial obligations.
The future financial burden is especially problematic because the PA is unlikely to repeat the early gains it made in revenue collection after 1994. Increasingly it will need to limit its expenditure and to prioritize. Even with donor funding, PA capital investment in infrastructure is low in relation to GDP. As the PA turns to borrowing, it will need to set up a debt management unit within the MOF to track flows and obligations.
The PA will also have to shift the distribution of revenue collection and expenditure between central and local government, in order to ease the burden on the central treasury. For example, it should revise the property tax and hand over responsibility for collecting it to municipal authorities.
Recommendations
Social Services
Context
The ministries delivering social services, including health care and education, were among the first public institutions to commence operation after the establishment of the PA in 1994. Although they do not account for the largest share of the general budget, they none-theless put the PA in direct contact with the largest number of users. Furthermore, they depend heavily on achieving high rates of user approval. At the same time, the large size of the social services sectors tends to mean that the PA operates in parallel with three other major service providers: UNRWA, NGOs, and the private sector.
A major task of the relevant PA ministries is therefore to regulate their respective sectors and to coordinate with the other pro-viders, as well as to deliver quality services in an efficient and cost-effective manner.
The ability of PA social services ministries (SSMs) to commence service delivery quickly was largely due to the smooth takeover of the existing departments of the Israeli-run Civil Administration, with its existing personnel, facilities, and operating procedures. However, this was a mixed legacy. The Israeli military government did little more than maintain the social services infrastructure at roughly the level inherited in June 1967 from the Jordanian administration in the West Bank and the Egyptian administration in the Gaza Strip, while the population doubled in size. The quantity and quality of services, especially in education and health care, also failed to keep pace with progress in neighboring Arab countries during the same period. The relevant departments of the Civil Administration had no authority to formulate sectoral development plans. They lacked experience in planning and budgeting, and were denied free access to demographic statistics. Consequently coordination was poor with local government and with nongovernmental providers. Exclusive Israeli control over zoning and use of public land outside municipal boundaries additionally limited the scope for construction of new facilities.
The limitations of public service delivery are evident in the fact that, by 1993, NGOs provided 60 percent of primary health care in the WBGS and East Jerusalem, 50 percent of hospital care, and 100 percent of disability care. Their continued activity has been vital in maintaining adequate social services under the PA. The existence of PLO-backed national councils that had operated under Israeli occupation also helped the SSMs assume their responsibilities effectively in 1994. For example, the Council for Higher Education provided a coordination and oversight body for the universities that were established in the WBGS in the 1970s independently of the Civil Administration. Similarly, the Health Council’s Planning and Research Center completed work on a national health plan shortly before the PA came into being.
The SSMs have also incorporated or otherwise accommo-dated PLO institutions that deliver similar services to Palestinians both in the WBGS and in the diaspora. Prominent examples are the PLO’s Social Affairs Institution (Welfare of the Families of Martyrs and Prisoners), Palestine Red Crescent Society (PRCS), and Refugee Affairs Department.
The task of the SSMs has been facilitated by the PA’s full civilian authority over some 95 percent of the Palestinian population of the WBGS, excluding East Jerusalem. Their remit extends throughout the Gaza Strip and Areas A and B of the West Bank as defined by the Interim Agreement of 1995. The movement of their personnel is impeded only when the Israeli military government imposes local or general border closures.
The near impossibility of travel between the West Bank and Gaza Strip presents a more serious impediment to normal operation. It affects common training, inspection, consultation, unification of performance evaluation, standardization of administrative procedure, and redistribution of human resources. Physical separation has also necessitated a duplication of certain managerial functions and posts. Israeli restrictions on the entry of Palestinians from the WBGS to East Jerusalem have also affected social service delivery. For example, the city contains the only Palestinian tertiary-care hospital and some of the best secondary-care ones.
As a result of these factors, the SSMs have had to expand rapidly and acquire far more complex organizational structures. The Ministry of Education (MOE) offers a telling example of the scale of the challenge: it inherited a total of twelve administrative employees and some 16,000 teachers from the Civil Administration in 1994, but now has more than 26,000 teachers working in about 1,200 schools. Yet it is barely able to cope with the rapidly growing school population, and the number of employees remains well below the level required to meet international educational standards.
However, expansion is constrained by serious cost factors. The devaluation of the new Israeli shekel since 1994 means that basic salaries in the PA civil service have lost about one-third of their value and almost one-half their purchasing power. This has caused unrest in the education and health sectors in particular, and greatly impedes implementation of the revised pay scales indicated by the new Civil Service Law approved in 1998. Cost also limits the PA’s ability to construct new classrooms and medical facilities, which remain in short supply. A final potential challenge to the PA in this area is the expectation that it will eventually assume responsibility for the parallel services currently delivered by UNRWA, which has its own staffing and separate administrative structure.
Inventory
There are four principal PA institutions delivering social services to the Palestinian public in the WBGS: the Ministry of Social Affairs (MSA), Ministry of Health (MOH), Ministry of Education (MOE), and Ministry of Higher Education (MHE). The Ministries of Labor and Housing are also relevant to social policy formulation and service provision, but come under the Economy section of this report.
Achievements
The achievements of the SSMs have been among the most remarkable of any PA institution. The MOE, which is the largest PA ministry in terms of personnel and budget, began operations only two days before the start of the 1994–95 school year. Yet it has managed in many districts to reduce class sizes or reduce the number of school shifts from three to two, although constraints on public investment threaten this achievement.
The SSMs have generally been able to draw up mission statements, define immediate objectives, establish clear and appropriate administrative and management structures, and build working relations with other ministries and agencies, NGOs, private sector providers, and the international donor community. Basic laws establishing the MOH and MHE and defining their mandates have been approved, while the MOE and MSA operate on the basis of provisional regulations pending new legislation. In general, the SSMs have achieved commendable levels of delegation of authority and decentralization. They have also increased their capability to compile and utilize statistical and other data, and to apply guidelines on internal auditing and performance-based evaluation.
The general aim of the SSMs is to promote community development. They seek to do so by strengthening social security; raising standards of living by providing high-quality services that are affordable and accessible; coordinating and regulating service delivery by the various providers within each sector; and avoiding duplication in order to ensure efficient use of resources. To this end the MOH, MOE, and MHE have drafted detailed and comprehensive five-year development plans, with clearly stated long-term goals, short-term operational objectives, and strategies. These plans include lists of activities, with implementation timetables and cost estimates.
The SSMs, supported by the PA cabinet and PLC, have also submitted new draft legislation, where applicable, to unify the laws and regulations that govern the work of all service providers in their respective sectors. Headway has been made in the clarification of mandates, made necessary by the rapid expansion of the payroll of the SSMs. The MSA has more than doubled its staff since the transfer of authority to the PA in 1994, while the MOH’s staff has more than tripled, from some 2,000 employees to the present 7,000. The bulk of these increases have taken place in “frontline” categories of teachers and health personnel, in agreement with international donor institutions.
Despite the rapid and massive expansion in personnel, recruitment to the SSMs has largely been unaffected by political or personal considerations. Furthermore, evaluation procedures for promotion in the SSMs are generally performance-driven, although this varies somewhat. The SSMs have also devoted considerable attention to human resource development. Needs and opportunities vary from one SSM to another, but generally there is encouragement for continuing education for staff, both locally and abroad, as well as in-service training. The MOH is planning a graduate school of public health and has transformed the School of Qualified Nurses into a College of Nursing offering the bachelor’s degree, for example.
The SSMs have moreover made considerable strides in automating their operations, and in raising computer literacy among employees. Staff are trained in data processing, fieldwork, and analysis, although capacity for advanced secondary analysis remains limited. Progress in setting up computerized and integrated management systems for personnel, procurement, and financial matters has expedited payment of benefits by the MSA, for example, and improved auditing in all SSMs.
Computerization has gone hand in hand with efforts to compile and process statistical data and to conduct secondary analysis and policy-oriented research. The MOH, for example, produces a statistical report with all relevant health and demographic indicators, and since 1995 has been working on an ambitious health management information system that collects and distributes data through computerized satellite links. The MOE similarly maintains a computerized database and produces a statistical yearbook on educational institutions and relevant indicators. For its part the MHE has set up the Palestine Academic Network to connect all institutes of higher education, and also publishes a comprehensive statistical yearbook on higher education. These and other data-based activities by the SSMs are conducted in collaboration with the PCBS.
Statistical research is also used to ensure attainment of goals involving quality. The MOH, which generates 33 percent of its operating costs from providing services such as health insurance, conducts systematic measurement and monitoring of the quality of health care and calculates the cost of services it offers. It also has a permanent grievance committee to handle user feedback and complaints. The MHE similarly applies unified procedures to estimate the cost of higher education to taxpayers and international donors. The MOE has set up a specialized unit to measure, monitor, and improve the quality of education, though not its cost.
As the example of collaboration with the PCBS in the area of data collection and dissemination shows, the SSMs engage in extensive cooperation and coordination with other ministries and agencies and with other service providers in their respective sectors. For example, the MHE has collaborated with the MOE and Ministry of Labor on a strategic plan for vocational training. It also works on training programs with the Ministry of Agriculture. Additionally, SSM coordination with UNRWA is especially important, given the number of its beneficiaries among the population in the WBGS.
Cooperation represents a fundamental change from practice prior to the establishment of the PA, when the relationship between the Israeli authorities and local NGOs was one of hostility and distrust. Similarly, NGOs affiliated with different political organizations rarely cooperated with each other, and initially they viewed the PA with some apprehension. Several national committees have now been formed with representatives of governmental and nongovernmental organizations. In certain cases policies and strategies are developed through public debate. The MOE five-year plan and the new curriculum were both developed through public workshops and multiple ministerial teams comprising MOE personnel, nongovernmental providers, and outside experts, involving some 1,700 persons in all.
The Higher Ministerial Committee at the MSA includes the head of the Union of Charitable Societies, the Palestinian NGO Network, the Central Committee for the Disabled, and other bodies involved in public health and development policy. Moreover, the MSA provides leadership in poverty-alleviation programs in cooperation with other PA institutions, NGOs, and UNRWA. A new health council brings together the MOH, representatives of the medical profession unions and other specialists. A new Health Planning Core Group consisting of NGO, private sector, and UNRWA representatives works to define sectoral priorities and to develop qualitative and quantitative measures for the evaluation of performance. Rather than set up its own clinics, the MOH has devolved much of its outreach programs to a consortium of NGOs operating in rural areas. For its part the MHE oversees five external councils with governmental and nongovernmental representation: the Advisory Council for Higher Education, Council of Scientific Research, Council of University Presidents (Rectors’ Conference), College Deans’ Committee, and Higher Council for Accreditation and Licensing.
Challenges
Despite impressive strides, the SSMs exhibit certain flaws. Implementation of standard systems of administrative procedure in relation to procurement, accounting, evaluation, and personnel matters still varies from one ministry or department to another. The absence of laws of establishment for the MSA and MOE, at a time when the Basic Law of the PA has not yet been ratified, leads to some unnecessary overlap in functions. This encourages individual decisions that may exceed proper mandates, resulting in costly duplication in certain areas and gaps in others.
The SSMs also continue to suffer from the overlap of the legal and administrative framework within which they must operate in WBGS. The MOE, for example, has inherited two different curricula, with divergent systems of training for teachers and supervisors, and of examinations and certification. Overlap is costly and complicates the functioning of MOE, as well as requiring two deputy ministers. Adoption of the new curriculum and Israeli implementation of the safe passage agreement connecting the WBGS should facilitate operations and enhance efficiency.
The SSMs are severely affected by the tardy and piecemeal manner in which their budgets have been approved and disbursed. To date, the national budget has been approved as late as seven months into the fiscal year, impeding implementation of programs and leading to cumulative delays over successive years. Just as serious, budgets are not automatically made available to the SSMs (as normal financial procedure would indicate) even after approval. One reason is the recurrence of liquidity problems at the Ministry of Finance, but another is the inherited PLO practice whereby individual PA ministers are compelled to renegotiate allocations with the president and to seek his approval for disbursement on an incremental basis.
To some degree, the SSMs tend to be both understaffed and overstaffed. Overstaffing is partly due to political factors, but a principal reason for understaffing is that the SSMs cannot attract qualified professional and technical personnel with their present pay scale. This in turn reduces cumulative skills acquired by the SSMs and impedes the career tracks of higher-level employees.
Staffing problems have further consequences, with implications for the general quality and cost-effectiveness of service delivery. One is the tight centralization of the financial system in the SSMs, as in other PA institutions, with little delegation of budgetary responsibility and the consequent restriction of departmental autonomy. The shortage of qualified staff, especially in advanced research and projections, impedes evaluation of the quality of services and assessment of cost-effectiveness. PA civil servants, like staff in bureaucracies everywhere, tend to view the use of indicators to measure performance with suspicion and apprehension because they assume that these can lead only to a negative assessment.
There is also some need for more extensive and systematic cooperation between the SSMs and other service providers, as well as with users. For example, scientific research promoted by the MHE is not yet tied systematically to a national R&D policy or to individual efforts by other providers, whether public or private. The MOE does not consult regularly with NGOs and other civil society organizations, while the MSA does not receive adequate feedback from users. Divisions within the health sector impede the delivery of services to marginal groups such as nomadic communities.
It is important to develop further the legal and regulatory framework enabling nongovernmental and private sector providers to compete directly for service delivery. In this context, the inability of the PLC and the executive branch of the PA to agree on a new law governing the activity of nongovernmental organizations has also left that sector lacking in legal reputation and protection. The requirement that all NGOs be officially registered, coupled with continuing disagreement between the MSA, Ministry of Interior, and Ministry of Justice over responsibility for registering NGOs, is a further impediment to their operation.
These shortcomings undermine the ability of SSMs both to conduct research and to utilize research conducted by others. Research initiatives in the area covered by the MSA, for example, come from the Palestine Economic Policy Research Institute, the Norwegian Confederation of Trade Unions Research Foundation (FAFO), and other institutions rather than the ministry. In general, the SSMs need to ensure the accumulation of statistical data over a number of years, and to train personnel to conduct performance- and policy-related analysis.
An area of particular concern is the division of labor and coordination of service delivery between SSMs and local government. The PA inherited a weak or nonexistent legacy in this regard from the Civil Administration. However, local government could manage and deliver certain services, leaving sectoral planning and regulatory aspects to the SSMs. Such a step would bring about greater decentralization, improved service quality and performance, reduced costs, and better responsiveness to user needs. However, central government has not made even such transfers to local government as are already mandated under existing legislation, and local government is therefore unlikely to take on added responsibilities.
The problems and shortcomings faced by the SSMs are hardly out of the ordinary. However, they gain added importance in light of the major increase in demand for social services anticipated in the WBGS. This is due to net population growth rates of 3.5 to 4 percent, to which may be added the influx of repatriated refugees from the diaspora or population movements between the West Bank and Gaza Strip. Changing economic and technological conditions locally and globally require a labor force with appropriate skills, while urbanization and industrialization alter the functional pattern and geographical distribution of social welfare and health care needs. The eventual transfer of UNRWA’s social services to the PA will impose a massive increase in the financial burden.
The provision of accurate and up-to-date population statistics by the PCBS has allowed some SSMs to prepare rough estimates of future needs for services, but projection methodologies and cost calculations are not yet available, especially for the medium and long term. Consequently, planning remains difficult; it is a task that requires greater effort by the SSMs and the PA’s central and sectoral planning agencies.
Recommendations
Economy
Context
Economic reconstruction, development, and growth in the WBGS are widely regarded as necessary both to underpin the peace process and to construct a modern, viable, and democratic Palestinian entity. This view is reflected in the major political effort and financial resources directed by the Palestinian Authority and international community toward the local economy.
Yet the Palestinian public institutions that deal with the economic sphere have been obliged to operate under particularly difficult conditions. The Israeli military government transferred responsibility for key economic sectors in the WBGS to the Palestinian Authority only at the end of August 1995, in accordance with the Oslo framework. It also bequeathed the Palestinian Authority laws, regulations, and administrative systems that were inadequate for the management of a modern economy, and that did little to expand free exchange with external markets. Additional problems derive from the legacy of exposure to Israeli policies and market forces over the preceding twenty-seven years of occupation. Israeli government policies continue to have a heavy impact on the Palestinian economy, because it is so closely integrated with that of Israel.
Moreover, the Israeli occupation left behind significant infrastructure deficits. From the 1970s to the early 1990s, the Israeli Military Government and Civil Administration spent only 15 percent of the budget on public infrastructure and services. 7 This compares to 25 percent in countries with comparable income levels, even though the population of the WBGS doubled during that period. In addition, UNRWA and Palestinian NGOs supplied an unusually large share of infrastructure and services.
The result, to give a few examples, was that roads had received little or no maintenance since 1967, the supply of electricity or telephone lines per capita was substantially lower than in neighboring Arab countries, and the WBGS largely depended on Israel for infrastructure.
The Protocol on Economic Relations of April 29, 1994, which was attached as an annex to the Agreement on the Gaza Strip and Jericho Area of May 4, 1994, laid a new basis for ties between the Israeli and Palestinian economies during the Interim Period. However, the Palestinian economy remains dependent on Israel for conduct of all its external trade. All goods exchanged between Palestinian and third-party markets must either pass through Israeli ports or through Israeli-controlled points of entry and exit in the WBGS. A large part of the Palestinian labor force also depends on employment in Israel. Finally, the Palestinian economy continues to be affected severely by conditions within the Israeli economy, including macroeconomic policies, inflation rates, and currency devaluation.
Continued Israeli control over land, water, and other factors of production in the WBGS also restrict the scope and scale of Palestinian economic development and growth, as does the absence of safe passage between the West Bank and the Gaza Strip. Israeli control of land use outside the areas under full Palestinian territorial control in the WBGS has also impeded construction, pushed up prices, and weakened bank lending due to lack of collateral and poor return on capital.
These conditions keep Palestinian markets localized and fragmented. The overall lack of free access for Palestinians to East Jerusa-lem is also a serious problem: the city houses most Palestinian marketing facilities; much of the West Bank’s tourism potential is dependent on the city’s religious sites; major north-south transportation links in the West Bank run through the city; the West Bank’s only airport, Qalandia, lies within the expanded city limits; and the city is an integral part of the power network in the central region of the West Bank.
Vulnerability to external shocks has clearly created a situation of continuous uncertainty for Palestinian public institutions that must deal with the economy. The vulnerability has added also to the financial burden by increasing unemployment and social security costs. Since 1993, shocks primarily related to Israeli closure measures and movement restrictions have begun to result in a fundamental shift away from a wage-based economy toward a rapid increase in marginal, low-productivity, and low-income generating informal sector activity. 8
The full scale of the challenge facing the Palestinian Authority is further underlined by the fact that the local economy must generate another 450,000 jobs in the coming fifteen years if it is to keep pace with natural population growth. This task is made even more difficult in an economy where private investment has dropped from 19 percent of GNP in 1993 to 10 percent in 1997.
An additional economic impediment identified by Palestinian entrepreneurs and investors is an unclear business operating environment within the Palestinian Authority. Property laws, investment laws, and the tax regime still are not sufficiently clear. It is precisely because the local economy is so vulnerable to external shocks and restrictions that it is imperative for the Palestinian Authority to provide an effective enabling regulatory and legal environment as a prerequisite for managing limited economic and financial resources efficiently. Such an environment is also necessary to attract investment from domestic and foreign sources, including expatriated Palestinians. Unless the prevailing political, policy, and institutional frameworks undergo deep transformations, Palestinian policymakers will not be able to foster the ambitious economic vision to which they and the WBGS population aspire.
Inventory
Economic management and administration involves a large number of ministries and agencies. Besides the Ministry of Finance, Ministry of Planning and International Cooperation, Ministry of Justice, and Palestinian Monetary Authority, these include: the Ministry of Economy and Trade, Ministry of Industry, Ministry of Agriculture, National Center for Agricultural Research, Ministry of Housing, Ministry of Labor, Palestinian Economic Council for Development and Reconstruction, Ministry of Public Works, Ministry of Transport, Civil Aviation Authority, Ministry of Telecommunications, Ministry of Supply, Energy Authority, Water Authority, Palestinian Central Bureau of Statistics, Institute of Standards and Measurements, Ministry of Environment, and Palestinian Environmental Authority. The public import monopolies and quasi-monopolies are of special importance, although they are not formally listed as part of the public administration nor are they itemized under the public expenditure plan.
Achievements
The PA’s creation of these various institutions of economic administration and management under difficult circumstances is a significant achievement. The PA has progressed considerably toward putting into place the legal, regulatory, and political framework necessary for private sector development, foreign direct investment, and commercial exchange with other economies.
Since assuming its responsibilities, the Ministry of Economy and Trade has negotiated a wide range of preferential and free-trade agreements with a variety of external parties. These include the European Union, the United States, European Free Trade Association member countries, and neighboring Jordan and Egypt. Moreover, the PLO has signed association agreements with the European Union and other bodies, as well as sovereign states, on behalf of the PA. The latter has also set up increasingly effective specialized departments to monitor implementation of the Paris Protocol and other related agreements with Israel, through the Joint Economic Committee.
Equally important, the relevant ministries have made a significant contribution to drafting new laws and revising existing ones to modernize and stimulate the Palestinian economy. Already in effect are the Laws for the Monetary Authority, Encouragement of Investment, and Condominiums. Others in draft form or awaiting promulgation, with the assistance of international institutions and donors, include laws on income tax, company registration, banking, insurance, investment, offshore companies, securities, secured lending and leasing, arbitration, industrial zones, commercial agency, accounting and auditing, pensions, labor, and intellectual property. Many of these are in advanced stages of preparation, and some are ready for promulgation.
Progress has been reflected, among other things, in the registration of a large number of new companies since 1994, despite the lack of investment. The financial sector has expanded rapidly from a negligible starting base, in terms of the number of banks and in total deposits. The construction sector, especially for housing, witnessed a boom, albeit one that proved short-lived due to border closures and dependence on cement and steel imports from Israel. The Ministry of Tourism has made appreciable progress in licensing new hotels and restaurants, facilitating the work of tour operators, and participating in international exhibitions, despite being hindered by external and internal challenges.
Several regional authorities for public infrastructure and utilities have similarly made strides in preparing planning and policy frameworks for the reorganization of their sectors, despite incomplete Palestinian control over land and resources. Cooperation between the Ministries of Labor, Higher Education, and Education over vocational training is an additional instance of effective collaboration across the public administration.
Challenges
The special political and territorial circumstances under which the PA assumed responsibility for the economy of the WBGS go far toward explaining many of the organizational, procedural, and functional shortcomings of its relevant institutions. The short time in which it was required to take effective control and stimulate economic activity limited the opportunity to plan and coordinate a suitable and streamlined institutional framework.
Yet the PA’s shortcomings are also the product of inherited organizational structures, political and personal rivalries, and work practices. These factors have continued to influence capacity-building and performance in the public institutions dealing with the economy even beyond the initial startup period. The PA should address them directly.
The formulation of the multiyear Palestinian Development Plan indicates that the process of consensus-building among the relevant ministries and agencies has been actively encouraged. However, considerable overlap of specialization and duplication of functions persists, reflecting inadequate delineation of responsibilities. This impedes policy formulation, planning and prioritization, implementation, and evaluation.
Industrial and foreign investment, export promotion, and employment policies are fragmented among various ministries, to mention a few examples. The problem is compounded by the absence of effective, formal mechanisms for consultation, coordination, and collaboration. Similarly, sectoral working groups or strategies are also either absent or inadequate, and clustering of ministries and agencies is urgently needed.
Duplication, fragmentation, and inadequate coordination also lead to unproductive competition, conflict, and waste of resources. This is additionally worrisome in light of the shortage of qualified personnel in certain categories, leading to a mismatch of staff and jobs in some cases and to overstaffing and understaffing in others.
To exemplify the extent of duplication, at present the Ministry of Economy and Trade and the Ministry of Supply both regulate internal markets, while the Ministry of Economy and Trade and the Ministry of Justice both register companies. There is also considerable overlap between the Ministry of Economy and Trade and the Ministry of Planning and International Cooperation with respect to planning. For its part PECDAR, which has supervised disbursement of significant donor funds and set up an effective works program, almost completely supplants the Ministry of Public Works in practice. The various agencies and regional authorities dealing with public infrastructure and utilities lack an umbrella framework, despite the overlap with both the Ministry of Planning and International Cooperation and PECDAR with respect to planning and implementation. This situation requires streamlining.
The lack of definition and delineation of responsibilities and resultant duplication are paralleled in some ministries and agencies by flaws in internal management, procedure, and performance. Chains of command are not always clear or are regularly circumvented. This undermines departmental autonomy, especially given the absence of well-defined operational tasks. Initiative and improved performance are also impeded by weak delegation of authority. In certain cases authority is overcentralized by the head of the ministry or agency. Internal statutes and obligations to users have at times been disregarded if they did not accord with the minister’s or head’s priorities or temperament, and access to information has been determined on the basis of personal and political considerations.
These problems demonstrate that internal factors, as well as external ones, are important causes of Palestinian institutional shortcomings. By the same token they are within the power of the Palestinian Authority to remedy. Indeed, certain problems may be remedied as part of a general review and restructuring of the public administration as a whole.
Consultation and coordination with local government is inadequate. Where aims have been defined this has often been due to donor input, yet that has not guaranteed implementation. It has also been difficult to attract qualified personnel from donor-funded projects onto the permanent public payroll. Overcentralization of authority internally has been an added disincentive to recruitment.
Additional needs include increased consultation and cooperation with users, academic institutions, and NGOs. This is especially relevant for the development of information systems and for horizontal communication, but also for policy formulation, planning, and analysis. There is similar need to make policy reports, technical studies, and statistical data more accessible to users, researchers, and the general public. The Palestinian Central Bureau of Statistics and the revisions to the Income Tax Law have achieved high levels of consultation with nongovernmental actors and increased access to information. However, this is far from evenly spread and there is a clear tendency to manipulate access to studies and data.
Consultation and cooperation with local government are especially important, while the role of academic councils and institutions of higher education in R&D needs to be increased considerably. Furthermore, some of the more effective public institutions in this sphere are donor funded, which means local sources of funding must be cultivated. This would encourage the PA to eliminate duplication of projects and utilize resources more efficiently.
The PA needs to develop its revenue base in order to assume a greater share of the Palestinian Public Investment Plan, and this requires improved economic management and administration. Much of the economic growth registered in the WBGS since 1994 has been due to public sector expansion, with public investment, representing one-quarter of total public expenditure, coming almost entirely from international assistance. Even so, in 1994–97 public investment was less than half the average for comparable developing countries.
New legislation is critical if the Palestinian private sector is to play a significant role in economic reconstruction and growth in the WBGS, and if the local economy is to attract foreign investment. The PA should finish drafting new laws governing various economic activities and bring those already finished into force. This applies, for example, to the new Labor Law, which has been unified and revised but not passed, and to the Income Tax Law. In other cases laws have been passed but not fully implemented. For example, the new Investment Law of 1995 made provision for a Higher Agency for the Encouragement of Investment, but this has not yet been established.
Looking ahead, the PA should prepare a trade team to negotiate entry to the World Trade Organization, and to prepare for the practical implications for tariffs of entry. In the meantime it also needs to clarify the definition and application of the exact roles of the public and private sectors. It needs institutions and regulations to allow and monitor the private delivery of infrastructure services and utilities, such as telecommunications, stock exchanges, and power.
In general, a clear priority of the PA should be to establish an efficient, effective, and transparent institutional and administrative framework to implement new legislation and to enable the private sector to make a healthy contribution. This would also counter the perception that public office allows special commercial privilege. For this reason, too, the PA should address the market-distorting effects of the public import monopolies and quasi-monopolies it has formed since 1994. It should also prepare legislation preventing monopolistic practices and requiring disclosure of all concessions, incomes, and expenditures.
Similarly, the PA should reform the system through which it requests and distributes Israeli permits for the entry of Palestinians to Israeli territory for business or travel or other purposes. This will make the application process more transparent and less vulnerable to manipulation or special privilege, and stimulate private sector confidence and activity. Intervention by senior officials in economic decisions, such as the daily setting of prices for basic foodstuffs by governors appointed by the Ministry of Interior, should also be ended.
The PA should in particular strengthen the Ministries of Finance and Justice so that they can provide such a regulatory and legal framework. It should also increase the autonomy and powers of regulatory bodies such as the Palestinian Monetary Authority, which should play an increased role in supervising the banking sector, and the Institute of Standards and Measurements, which has a major potential role to play in the internal and external trade of the WBGS.
Recommendations
Police Force
Context
The provision of security has been a cornerstone of the Oslo framework, and for that purpose it envisaged the establishment of a “strong” Palestinian Police Force (PF). Its duties as defined most recently in Article IV, Annex I, of the Interim Agreement of 1995 are:
The PA undertook these tasks against a background of protracted past conflict with Israel and highly charged domestic political opposition to the Oslo framework. It faced major impediments, not least of which was a near-total lack of experience in civilian police functions and peacetime law-and-order operations. This was partly because the Palestinian police force under Israeli occupation never exceeded 1,000 for the whole of the WBGS, nor was it trained or authorized by the Israeli military government to operate in certain spheres. The mass resignation of police personnel during the intifada in 1988 left the WBGS largely without policing until the establishment of the PA in 1994, resulting in instances of vigilante violence and a general decline in the rule of law and public order.
The nascent police force in 1994 also lacked experience initially because the bulk of its personnel, especially at officer rank, were drawn from Palestinian National Liberation Army (PNLA) units based in Arab countries. These personnel had a wide range of conventional and guerrilla military skills, but none in policing. The “returnees” also faced problems of integration with newly recruited local personnel, who tended to occupy the lower ranks in light of their inexperience and short period of service. The PA had to contend with the widespread expectation among former intifada activists that they were entitled to membership and rank in the police force in recognition of their contribution to the national struggle. This was especially true of local members of the principal PLO guerrilla group, Fateh, which was the backbone of support for the Oslo framework, and of activists who had served Israeli prison sentences.
Last, but not least, the physical separation of the West Bank and Gaza Strip has severely complicated the structure and functioning of the PF. The PF has had to form parallel commands and branches in each area, and to operate within the bifurcated legal, justice, and administrative systems inherited by the PA in the two areas. The division of the West Bank into Areas A, B, and C in accordance with the Interim Agreement of 1995 and the continued presence of Israeli settlement blocs in the Gaza Strip have further fragmented the territorial continuity that is necessary for the mobility and functioning of the PF.
Inventory
According to the Palestinian Israeli Interim Agreement of September 1995, the PF forms a single, integral unit under the control of the PA. It is composed of six operational branches: Civilian Police (including traffic police, Criminal Investigations Department, anti-drug unit, and riot police), Public Security Force (known in Arabic as the National Security Force), Preventative Security, Presidential Security (formerly Force 17), General Intelligence, and Civil Defense (Emergency Services and Rescue). The Public Security Force comprises six additional units: Intelligence (commonly known as Military Intelligence), Coastal Police (commonly known as Naval Police), Aviation Police, Border Police, Customs Police, and Disciplinary Police (commonly known as Military Police).
All members of the six Palestinian Police Force branches are supposed to be subordinate to one central command in each district. The PF answers directly to President Arafat, but not in his capacity as minister of interior. Instead he has formed the Higher Council for National Security, composed of the heads and their deputies of all PF branches, to provide consultation and direction in operational matters. Arafat is also commander-in-chief of PLO forces outside the WBGS, a position that will not necessarily be held by any PA successor. The PF provides the members of the state security court in Gaza, which is convened by presidential order.
Achievements
The PF has made significant and impressive strides in achieving its main objectives since 1994. Above all, it has provided public law and order for Palestinians living under full PA jurisdiction in the WBGS, while working to fulfill PA security commitments toward Israel. The PF has shown itself capable of close and effective coordination with its Israeli counterparts in a variety of areas, subject only to the state of relations between their respective political leaderships. The PF has recently established new sections to deal with specialized civilian matters, such as the Legislative Council police and customs police. U.S. agencies have directly monitored PF implementation of security commitments toward Israel since the Wye River Memorandum was signed in October 1998, in response to Israeli security concerns. On several occasions since then the U.S. administration has confirmed PA adherence to the terms of the accord and authorized the release of pledged assistance.
Progress has required a considerable training and retraining effort for new recruits and ex-PNLA personnel, much of it in close coordination with the international donor community. The latter, in collaboration with local NGOs, has also provided training in human rights and the rule of law, especially for the civilian police. Institutional capacity and operational performance have varied from one branch to another and from one district to another, but the PF has clear internal statutes and organizational structures and is in the process of ratifying its mission statements and rules of engagement.
Certain police branches are credited in particular with achieving commendable levels of performance and of internal discipline, in part thanks to their access to specialized training from the international donor community and to the lead taken by their commanders. For example, the Civilian Police have undertaken a conscious effort to develop community policing and has an active public relations program.
In the process, the PF has improved on certain shortcomings in its initial performance, albeit without eliminating them. Human rights violations continue, but the rate appears to be declining, partly as a result of domestic protest and external pressure. The aforementioned training in human rights has also helped reduce the incidence of violations. The same may be said of alleged corruption, extortion, and involvement by PF officials in undeclared commercial activities, although the reality and extent of such abuse or of its decline cannot be determined. The initial overlap and confusion of functions between the various PF branches have been reduced considerably, leading in turn to greater observance of proper rules of legal procedure, including the use of warrants.
The Higher Council for National Security has been instrumental in this regard, clarifying the division of labor between the various PF branches concerning powers of detention and interrogation in security and civilian cases. In particular, it has assigned all civilian matters to the Civilian Police branch, except where additional assistance is needed. In 1998 the Higher Council also drafted standardized mission statements and rules of engagement, although these have yet to be ratified by President Arafat.
Moreover, the PF has undertaken sensitive liaison and cooperation missions with outside parties. It is nominally responsible for and staffs the Palestinian side in the Joint Security Committee, subsidiary District Liaison Committees, and joint patrols with Israel Defense Force counterparts. It similarly seconds senior personnel to the EU-Palestinian permanent security committee and the trilateral U.S.-Israeli-Palestinian and bilateral U.S.-Palestinian security committees.
Challenges
Despite the existence of an organizational chart, there is a continuing need to clarify and rationalize the structure and legal basis of the PF. There is a pressing need for a Law of Establishment for the PF. The Oslo framework authorizes the establishment of the PF but provides no guide to its rights or to the limits to its power. This leaves the door open for intrabranch rivalry, human rights abuses, and poor procedural practice.
The fact that the various PF branches and even their subordinate branches and departments report directly, and separately, to the PA president has given rise to the widely held perception among the Palestinian public and international community that there is an uncontrolled and ad hoc proliferation of security agencies in the WBGS. This is reinforced by the fact that the president appears to make all senior appointments, including the heads of all branches and subordinate branches and departments.
The division of labor between PF branches has improved, but remains unclear and appears to depend on the president’s choice in given circumstances rather than on formal and preexisting task descriptions. This complicates operational coordination and encourages rivalry, with the added consequence that certain PF branches are viewed by their commanders as power bases. Looking to the future, this could lead to potentially violent competition between certain branches and to their implicit intervention in civilian rule should a succession crisis occur in the presidency. This risk underlines the lack of political oversight by the cabinet, PLC, and judiciary.
The Oslo framework imposes a somewhat arbitrary and politically motivated unity of organizational structure on the PF. This compels the PA to group diverse police and security functions under a single command. These include border and coastal guards in Gaza, antiterrorist units, internal and external security, civilian policing, and public law and order functions.
The establishment of the Higher Council for National Security in 1994 thus becomes understandable. However, the fact that its own rules of procedure and area of functional responsibility remain informal undermines its ability to act as a balanced and effective command structure. This is compounded by the fact that thirty to forty persons may attend any given meeting, making the council unwieldy and relatively inefficient while marginalizing the director general of the PF. The central administrative departments of the PF are similarly impeded in prioritizing and standardizing services such as training, which limits the potential benefits of international technical assistance.
Furthermore, the Higher Council for National Security’s lack of clearly defined routine or functional autonomy is reflected in its inability to meet other than in the presence of the PA president. This could prove dangerous should a serious security threat arise in his absence. The council’s subordination to civilian authority needs to be clearly acknowledged in the formal definition of its remit and rules of procedure. The lack of authority of the Ministry of Interior over any branch of the PF is worrisome in this respect.
Another problem is that the physical separation of the WBGS and difficulty of movement between West Bank cities have complicated local security operations and law enforcement. Still, the PA could do more to clarify and normalize the division of responsibilities and chain of command. Security committees comprising representatives of the various PF branches already provide a coordination mechanism among them and with local government in some West Bank cities, but not in all. Their relationship to municipal councils is not formally codified, and there is a risk that the PF may exercise excessive influence in municipal affairs. Further duplication and confusion of roles occur with the governors appointed by the president in the West Bank, who are officials of the Ministry of Interior and nominally responsible for internal security matters in their provinces.
The jurisdiction of the PF would be further clarified by the unification of the legal framework and justice system in effect in the WBGS. A problem of particular urgency is to enhance PF ability to enforce court decisions, possibly by the creation of a capable judicial police. It is equally important to empower the attorney general and assert the authority and autonomy of that office, especially in relation to the PF and the PA president. The recent extension of the power of state security courts to act in cases of smuggling by civilians, VAT evasion, and other “economic crimes,” further undermines the authority of civilian courts. It also confirms the need for clear separation of duties and jurisdiction. These steps are important to improve effectiveness and professionalism in the PF and to place its relations with the public on a healthy basis.
For the same reason, codification and ratification of PF mission statements and rules of engagement should be completed. The Higher Council for National Security drafted these documents in late 1998 and attempts to observe them in practice, but they have yet to be ratified by President Arafat. It is also apparent that PF personnel at all levels are often frankly ignorant of the existence or pertinence of formal rules of engagement. This indicates that standard rules and regulations are not consciously applied, even if and when they do exist. The situation may be better in the Civilian Police branch in particular, but there is a general lack of information and transparency on these matters, whether within the PF itself or among the general public and lawyers and human rights groups. Further improvement remains dependent on implementation of the long-standing project to establish a national police academy, providing training on the basis of a unified curriculum, with the assistance of the international donor community.
The PF has inherited internal statutes from the Palestinian National Liberation Army governing internal disciplinary and personnel matters, but their application appears to be subject to the president’s will. Of still greater concern is the need for a clear code of conduct governing the involvement of PF personnel in commercial activities of any type. Although most PF officers appear to behave properly, there is clear scope for abuse of position and privileged control over access to areas under PA security control. There have been reported instances of unauthorized action by certain PF branches in tax collection. PF facilities have also on occasion been constructed with donations from local merchants. This may reflect public support for the PF and the PA’s limited financial means, but it could equally lead to corrupt practices and a culture in which members of the public come to expect preferential treatment and services in return for material favors.
Questions of effectiveness and propriety arise in part because of the excessive number of PF personnel. Security and law enforcement are the single largest item in PA recurrent expenditure, accounting for some 30 percent of the general budget. There are understandable political reasons for overemployment in the public sector generally, but this has left basic pay in the PF one-third lower than in the civil service and below the income level required to avoid poverty.
Low pay also means lower-quality recruits, and a potential loss of better-trained and better-qualified personnel under the pressure of economic inflation or as conditions in the civilian economy improve. The added costs of training and equipping personnel prevent the PF from being cost-effective. Moreover, lack of transparency regarding personnel figures and expenses impedes political and financial accountability to the PLC.
Lower performance also means lower levels of approval and confidence, among both the Palestinian public and the PA’s external counterparts in Israel and the international community. An excessively large PF is therefore counterproductive politically as well. A further political problem is the close identification of the PF in general, and of specific branches, with the dominant PLO faction, Fateh. Training based on a standardized national curriculum should emphasize professionalism and the rule of law, at the expense of partisan affiliation.
Recommendations
Endnotes:
Note 7: UNSCO, The Economy of the West Bank and Gaza Strip., p. 14. Back.
Note 8: Jon Pederson, Developing Palestinian Society: Socioeconomic Trends and Their Implications for Development Strategies (FAFO Report 242, May 1998), p.3; http://www.fafo.no/PUB/242/Katp3.html. Back.
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